Another Tough Day in the Marketplace

November 23, 2011

German bund yields shot up 14 basis points following a technically undersubscribed auction.  A result of such was to reduce peripheral bond spreads, but their long-term interest rate levels in these countries remain way too high.

The Bank of Greece warned of the risk of Greece leaving the European Economic and Monetary Union.

China’s preliminary manufacturing purchasing managers index sank to a 32-month low of 48.0 from a reading of 51.0 in October.  It is a foreboding development that China’s index has fallen below the 50-line the delineates expansion from contraction.  The production component of this preliminary HSBC-compiled measure fell 4.7 points to 46.7 in November.

Euro area industrial orders plunged 6.4% between August and September and by 2.5% (9.6% annualized) in the third quarter.  The September orders level was at an 11-month low and only 1.6% greater than a year earlier versus an 11.1% increase in the year to April 2011. 

Preliminary November purchasing manager survey results for the euro area, Germany, and France suggest that GDP will post declines this quarter of 0.6% in Euroland and 0.5% not annualized in its two largest members.

  • The composite euro area index scored a 47.2 after 46.5 in October.  Such was the third sub-50 reading in a row.  The factory index of 46.4 was the lowest since July 2009.  The rate of contraction in services slowed, as that PMI component rose to 47.8 from 46.4.  New orders in manufacturing had their worst reading since May 2009, and business expectations in services plumbed to a 32-month low.
  • The German composite PMI held steady at 50.3, as manufacturing fell from 49.1 to 47.9, lowest since July 2009, while services rose by 0.8 to 51.4, a four-month high.
  • The French composite index rebounded 3.1 points to 48.7 but remained below September’s 50.2 reading and August’s 53.7 score.  Manufacturing fell by 0.9 to a 29-month low of 47.6, and services recovered 4.7 points to 49.3.

The euro is 0.9% weaker against the dollar and 0.4-0.5% softer against the Swissie and sterling.  The dollar also advanced 1.3% against the Australian currency, 0.8% relative to the kiwi, and 0.4% versus the loonie.  The yuan is a tad firmer than yesterday.

Sentiment toward commodities is more tarnished.  Oil and gold prices fell by 1.4% and 0.4% to $96.63 per barrel and $1695.50 per ounce.

In the Pacific Rim, Japanese markets were closed for the observance of Labor Thanksgiving.  Equities tumbled by at least 2.0% in Australia, Hong Kong, Taiwan, South Korea, and India.  Stocks dropped 1.3% in Indonesia and 1.0% in China.  In Europe, the Dax is 0.2% firmer, but the British Ftse and Paris Cac have lost another 0.6% and 0.2%.

U.S. share prices fell more than 1.0% in the first fifteen minutes of trading.  The U.S. will be closed Thursday for Thanksgiving. 

New U.S. jobless insurance claims of 393K last week was similar to the previous week.  The four-week average of 394.25K new claims was 10K less than the average of the previous four weeks and 22K less than in the four weeks to September 24.

U.S. durable goods orders fell 0.7% in October, less sharply than expected, and they were still 6.9% higher than a year before.  A drop in core orders that exclude defense and aircraft reversed increases posted in August and September.

U.S. personal income rose 0.4% on month and 2.2% on year in October, which was a shade better than expected.  Expenditures firmed just 0.1% on month, and the savings rate recovered to a still-low 3.5% from 3.3% in September.  The core personal expenditure price deflator edged up 0.1% on month and 1.7% on year, signaling continuing benign inflation.

Housing remains an albatross on the U.S. economy.  Mortgage applications fell by 1.2% last week despite a 4.23% 30-year fixed mortgage rate.

The key Turkish central bank rate was left steady at 5.75% as analysts expected.

Published minutes from the November meeting of the Bank of England’s Monetary Policy Committee, the vote not to change policy settings further was unanimous, nine to zero.  The Bank Rate has been 0.5% since March 2009.  Asset buying in October was raised by 75 billion pounds to GBP 275 billion, a limit that will not be met until end-January.  While the dollar to further asset buying beyond that ceiling was left open, the minutes also suggested that CPI inflation may not recede as far as assumed next year.

French business sentiment fell to a reading in November of 95 from 97 in October and 99 in September.  It was the lowest level in 19 months.

British mortgage loans in October of 35.3K exceeded the number in September of 33.5K.  Iceland’s wage cost index rose 0.7% last month and accelerated to a 12-month increase of 8.9% from 8.4%.

Consumer price inflation in South Africa accelerated to 6.0% last month from 5.7% in September.  In Singapore, CPI inflation ticked up 0.1 percentage points to 5.4% in October.  Malaysian inflation held steady at 3.4%.

Australia’s index of leading economic indicators firmed 0.1% in September, and the coincident index advanced by a comfortable 0.3%.  Construction work completions shot up 12.5% last quarter, far more than anticipated.

The Finance ministers of France and Germany and Canada’s central bank governor will be speaking today.  Today is also the official deadline for an agreement by the U.S. Congressional super budget reduction committee, which failed in that mission.  The K.C. Fed manufacturing index and the U. Michigan revised consumer confidence index arrive soon.

Copyright 2011, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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